How to Invest in JSE Top 40 Index
The JSE Top 40 Index is one of two major stock indices composed of companies listed on the Johannesburg Stock Exchange. What are the JSE Top 40 companies in 2024? And how has the index performed in recent years? In this article, we will answer these questions and explain how to invest in JSE Top 40 and how to trade the index using CFDs.
Table of Contents
What Is the JSE Top 40 Index?
The JSE Top 40 Index, sometimes referred to as the FTSE/JSE Top 40 Index or the South Africa 40 Index, is a stock index which consists of the 40 largest companies listed on the Johannesburg Stock Exchange (JSE) by market capitalisation.
Although its 40 constituents only represent around 10% of the approximately 400 companies listed on the JSE, combined they represent around 80% of its total market capitalisation. Therefore, the JSE Top 40 Index is generally considered a reliable reflection, or a benchmark, of the wider South African stock market.
As well as the JSE Top 40 Index, there is also the JSE FTSE All Share Index which represents 99% of the full market capital value of the JSE, subject to minimum freefloat and liquidity requirements.
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JSE Top 40 Companies List 2024
So, now we know what the JSE Top 40 Index is, what are the JSE Top 40 companies? In the table below, we have compiled a list of the index’s constituents in 2024.
If you are interested in how to invest in JSE Top 40, it is naturally a good idea to be aware of the companies which are in the index, as their performances drive its price.
However, the index’s constituents are weighted according to their market capitalisation, meaning that the companies with a larger market cap influence the overall index more than companies with a lower market cap, and vice versa.
The top ten constituents account for around 55% of the total JSE Top 40 market cap, meaning that these ten companies have a greater effect on the direction of the index than all the others. Therefore, if considering investing in JSE Top 40 you should aim to be familiar with these ten companies, their performance and their future outlook.
Source: FTSE Russell – FTSE/JSE Top 40 Index Fact Sheet – 29 December 2023.
JSE Top 40 Performance
Below, we can see the JSE Top 40 index chart showing its long-term performance.
In the ten-year period ending 31 December 2023, the JSE Top 40 Index produced an annualised total return of 8.92%. The table below shows the JSE Top 40 Index's total return in each of the last ten calendar years.
How to Invest in JSE Top 40
So, how can you go about investing in JSE Top 40?
Like any stock index, it is not possible to invest directly in the South Africa 40 Index. Nevertheless, there are still many ways for you to invest in the index. If you want to gain exposure to the entire index, you could choose to invest in a mutual fund or Exchange-Traded Fund (ETF) which passively tracks it.
These types of index funds pool investor capital in order to purchase shares in all the companies listed in the JSE Top 40, meaning that you can gain exposure to the entire index with a single investment.
Alternatively, if you are not interested in investing in all the JSE Top 40 companies, you could buy shares in the specific companies which you are most interested in. For example, if you wanted to build a portfolio based on the JSE Top 40 Index, you might choose to invest in the top ten constituents which we highlighted earlier.
How to Trade JSE Top 40 Index
If you are wondering how to trade JSE Top 40 over a shorter time horizon, Contracts for Difference (CFDs) could be an option to consider.
CFDs are a financial derivative product which represent a contract between two parties agreeing to exchange the difference in an asset’s price between the time the contract is opened and closed.
CFDs allow traders to attempt to profit from both rising and falling markets, meaning that you can use CFDs if you are feeling either bullish or bearish on the JSE Top 40 Index. Furthermore, CFDs benefit from the use of leverage, which allows traders to open a larger position size with a smaller initial deposit.
Consequently, leverage can magnify a trader’s potential gains. However, it must be used with caution, as it can just as similarly magnify potential losses on a losing trade.
Amongst the many different instruments which can be traded with Admirals using CFDs are a variety of stock indices, including the South Africa 40 Index. In order to start trading CFDs on the index, follow these steps:
- Open a Trade.MT5 account with Admirals and log in to the Dashboard
- Click ‘Trade’ next to your account details to open the MetaTrader Web Terminal
- Search for the South Africa 40 Index and open the price chart
- Press ‘Create New Order’, enter the desired CFD volume and click ‘Buy’ or ‘Sell’ to send your order to the market!
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As well as individual stocks, you can trade CFDs on some of the most popular stock indices in the world, including the JSE Top 40 Index, FTSE 100 and S&P 500! Click the banner below to find out more and open an account today:
FAQ
What Is the Average Return of the JSE Top 40?
The JSE Top 40 Index produced an annualised total return of 8.92% in the ten-year period ending 31 December 2023.
What Is the Difference Between the All Share Index and the Top 40 Index?
The JSE All Share Index is composed of 129 stocks listed on the Johannesburg Stock Exchange (JSE) which account for 99% of the total market capitalisation of all ordinary securities listed on the exchange. Whereas, the JSE Top 40 Index consists of the largest 40 companies on the JSE by market cap.
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INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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- The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
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